Shanti Gears had informed on 17-12-18 that the meeting of the Board of Directors of the Company is scheduled on 26/12/2018 , inter alia, to consider and approve the declaration of Interim Dividend and Buyback of equity shares of the Company. Shanti Gears Buyback as approved by its Board comprises buyback of fully paid up equity shares of Re.1 each not exceeding 50,00,000 (Fifty Lakhs only) Equity Shares at a price of Rs.140 (Rupees One Hundred and Forty only) per Equity Share, for an aggregate amount of up to Rs. 70,00,00,000 (Rupees Seventy Crores only). Shanti gears has also declared a one-time Special (Interim) Dividend of Rs. 5/- per equity share of the face value of Rs. 1 each.
Shanti Gears buyback represents approximately 6.12% of the total paid-up equity capital of the Company and is on a proportionate basis under “Tender Offer” route.
Shanti Gears Buyback: Updates
- Shanti Gears Live Buyback
- Shanti Gears Buyback from 13-03-19 to 27-03-19
- Shanti Gears Buyback entitlement- 21%
See List of all Forthcoming and Recent Buybacks
Shanti Gears Buyback 2018
The details of Shanti Gears buyback are given in the table below.
Particulars | Buyback 2018 |
|---|---|
| Announcement | 17-12-18 |
| MP on the day | 132 |
| Board meet | 26-12-18 |
| Type | Tender |
| Buy Back Price | 140 |
| MP befo BM | 131.0 |
| MP after BM | 131 |
| % Premium on MP | 6.87% |
| BuyBack Size- Rs. Cr | 70 |
| BuyBack Size- Shares | 5,000,000 |
| Equity Capital- cr | 8.17 |
| Tot No.of shares | 81,715,853 |
| Interim Dividend | Rs. 5 |
| RD Dividend | 07-01-18 |
| Promoter Holding | 70.12% |
| FV of Share in Rs. | 1 |
| % Buyback | 6.12% |
| RD Buyback | 08-02-19 |
| Buy Back Issue date | 13-03:27-03-19 |
| Shares reserved- Retail | 750,000 |
| Shareholders on RD | 14617 |
| Shares on RD | 3499904 |
| Buyback Entitlement | 21.43% |
| Shares Tendered | 661056 |
| Tendering ratio | 18.89% |
| Retail response | 0.881408 |
| Aceeptance | 100% |
Shanti Gears Buyback: Estimate of Acceptance Ratio:
This framework is based on estimation of shareholding of Shanti Gears shareholders who hold around 1500 number of shares. To this we have added estimates for
1) Few additional purchase of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Fresh Purchase of Shares by Arbitrage investors.
Based on approximations indicated above, the entitlement ratio for Shanti Gears Buyback is expected to be low. Considering a moderate tendering ratio, under normal circumstances Shanti Gears Buyback could have an acceptance ratio of 12-25% depending on how much new arbitrage investors buy into the stock.
Estimated Returns for Shanti Gears Buyback
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback. Investors may kept in mind that stock markets are quite volatile at this juncture and there are many political and other uncertainties related to international markets. We have depicted estimated Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
Shares Purchased | 1400 | Nos. | |
|---|---|---|---|
| Buyback Price | 140 | ||
| Abs Returns (includes Div) | |||
| MP (30-11) | 121.00 | ||
| Investment (Rs.) | 169400 | ||
| MP aft Buybk | |||
| Acceptance % | 114 | 116 | 118 |
| 12% | -3.21% | -1.75% | -0.30% |
| 15% | -2.56% | -1.16% | 0.25% |
| 20% | -1.49% | -0.17% | 1.16% |
| 25% | -0.41% | 0.83% | 2.07% |
| Actual Return | |||
| MP aft Buybk | |||
| Final Acceptance | 130 | ||
| 100.00% | 15.70% |
This post is purely for informative and educational purpose and is in no way suggestive of taking any position in the counter. Profit or Loss in any buy sell operation in stocks is associated with significant risk of capital loss. For more on Buyback Benefits and other issues please refer the earlier Posts.
Buyback of Shares: A Primer for Retail Investors
About Shanti Gears
- Shanthi Gears Ltd. has been a leading player in industrial gears
- It has a wide spectrum of products to cater to industries ranging from Textile to Aviation.
- Shanti Gears customers include prestigious names like Bombardier, Indian Railway, Alstom, HAL, David Brown, Rieter India, Flender-Siemens, Voith Turbo India, Cummins India, L&T, Tata Steel, Lafarge-ACC, Demag India Cranes, Danieli and many more.
- With an eye on opening up new market segments, Shanti Gears has enhanced its capabilities for the development of high-end gearboxes.
- Spanning over four decades of manufacturing history Shanti gears since 2014 is part of the 4.6 Billion US$ Murugappa group
Shanti Gears: Price Trend, Summary of Financials
Quarterly Results:
| Particulars | Sep-18 | Jun-18 | Sep-17 |
| Sales | 59.41 | 61.95 | 54.29 |
| Total Income | 62.87 | 64.31 | 56.86 |
| Total Expenditure | 48.6 | 50.27 | 43.1 |
| PBIDT | 14.27 | 14.04 | 13.76 |
| Interest | 0 | 0 | 0 |
| PBDT | 14.27 | 14.04 | 13.76 |
| Depreciation | 2.85 | 3.01 | 4.13 |
| Tax | 1.75 | 2.55 | 3.33 |
| Deferred Tax | 0.67 | -0.02 | -0.86 |
| PAT | 9 | 8.5 | 7.16 |
| EPS | 1.1 | 1.04 | 0.88 |
| EPS (Ann.) | 4.41 | 4.16 | 3.51 |
| Equity | 8.17 | 8.17 | 8.17 |
| Face Value | 1 | 1 | 1 |
| PBIDTM(%) | 24.02 | 22.66 | 25.35 |
| PATM(%) | 15.15 | 13.72 | 13.19 |
Assessment: Shanti Gears Buyback
- Shanti Gears turnover for the quarter was higher by 9% in comparison to the corresponding quarter of the previous year and at Rs. 59.41 Crores against Rs. 54.31 Crores in the same quarter of the previous year. The net profit after tax for the quarter was 26 % higher at Rs. 9.00 Crores against Rs. 7.16 Crores in the same quarter of the previous year. The Profit before tax for the quarter was Rs. 11.42 Crores against Rs. 9.63 Crores in the same quarter previous year, up by 19%.
- During the quarter the Company improved its order book position significantly by booking orders for Rs. 73.7 Crores (against Rs. 56.4 Crores for corresponding quarter of the previous year), a growth of 31%. Pending order book as on 30th September 2018 was Rs. 149 Crores against Rs. 121 Crores in the corresponding quarter of the previous year.
- Company has been maintaining a healthy dividend payout of 26%
- Shanti Gears is virtually debt free company.
- For FY 2017-18 PAT grew from Rs. 192.96 crores in FY 2016-17 to` 204.85 crore.
- Shanti Gears Stock is trading at 3.19 times its book value and PE ratio of 31..
- Despite the lure of ontime dividend of Rs. 5/- , Shanti Gears buyback may not be attractive due to estimates of a low final acceptance ratio. Thus Shanti Gears buyback offer may not be very attractive based on these assumptions.
- These are my estimates only and please do your own diligence in this matter as even what may appear as totally safe arbitrage investments in stock markets have inherent risks.
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk. Further the data in the post is prone to errors.